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Yahoo and Microsoft have officially announced today an agreement. Under the deal, Microsoft will power Yahoo search while Yahoo will become the exclusive worldwide relationship sales force for both companies? premium search advertisers.

Microsoft's Bing search engine will be the exclusive algorithmic search and paid search technology for Yahoo's sites, while Yahoo will be responsible for selling premium search ads for both companies.

Under the deal, Microsoft will acquire an exclusive 10-year license to Yahoo's core search technologies, and it will combine them with its own search technologies.

Microsoft will compensate Yahoo through a revenue-sharing agreement and pay traffic acquisition costs (TAC) to Yahoo at an initial rate of 88 percent of search revenue generated on Yahoo sites in the first five years.

Each company will maintain its own separate display advertising business and sales force, they said.

"This agreement comes with boatloads of value for Yahoo!, our users, and the industry. And I believe it establishes the foundation for a new era of Internet innovation and development," said Yahoo! Chief Executive Officer Carol Bartz. "Users will continue to experience search as a vital part of their Yahoo! experiences and will enjoy increased innovation thanks to the scale and resources this deal provides. Advertisers will also benefit from scale and enjoy greater ease of use and efficiencies working with a single platform and sales team for premium advertisers. Finally, this deal will help us increase our investments in priority areas in winning audience properties, display advertising capabilities and mobile experiences."

Providing a viable alternative to advertisers, this deal will combine Yahoo and Microsoft search marketplaces so that advertisers no longer have to rely on Google, which dominates more than 70 percent of all search. With the addition of Yahoo!?s search volume, Microsoft will achieve the size and scale required to unleash competition, for consumers as well as advertisers.

Microsoft Chief Executive Officer Steve Ballmer said the agreement will provide Microsoft?s search engine, Bing, the scale necessary to more effectively compete, attracting more users and advertisers, which in turn will lead to more relevant ads and search results.

"Through this agreement with Yahoo!, we will create more innovation in search, better value for advertisers and real consumer choice in a market currently dominated by a single company," said Ballmer. "Success in search requires both innovation and scale. With our new Bing search platform, we?ve created breakthrough innovation and features. This agreement with Yahoo! will provide the scale we need to deliver even more rapid advances in relevancy and usefulness. Microsoft and Yahoo! know there?s so much more that search could be. This agreement gives us the scale and resources to create the future of search."

The agreement does not cover each company?s web properties and products, email, instant messaging, display advertising, or any other aspect of the companies? businesses. In those areas, the companies will continue to compete vigorously.

The transaction will be subject to regulatory review. The agreement entered into today anticipates that the parties will enter into more detailed definitive agreements prior to closing. Microsoft and Yahoo! expect the agreement to be closely reviewed by the industry and government regulators, and welcome questions. The companies are hopeful that closing can occur in early 2010.

The companies have established a website at http://www.choicevalueinnovation.com to provide consumers, advertisers and publishers with additional information about the benefits of the agreement.